Interim Financial Reporting: Second Quarter Update January 11, 2012 Interim Financial Reporting Practices Key Points of this Note: The Parliamentary Budget Officer (PBO) updated the summary tables of quarterly report disclosures, based on departments’ and agencies’ second quarter statements. The overall quality of quarterly reporting improved compared to the previous quarter. At the same time, gaps persist in the disclosure of federal austerity measures: o Only one-third of organizations identify the impact of the Government’s Operating Budget Freeze. o Roughly half of organizations affected by the 2010 Strategic Review exercise outline the specific impacts. Prepared by: Jason Jacques* * Contact Jason Jacques (e-mail: jason.jacques@parl.gc.ca) for further information. i Interim Financial Reporting Practices 1. Context In November 2011, the Parliamentary Budget Officer (PBO) examined the new quarterly reporting regime for federal departments and agencies, comparing it to other interim reporting practices across the Organisation for Economic Cooperation and Development (OECD).1 the five key disclosures highlighted in the PBO’s earlier report (Table 1).3 Table 1 Key Disclosures Assessed by the PBO Reconciliation The PBO concluded that the new interim reporting framework addressed many of the shortcomings identified in the OECD’s 2011 Parliamentary Budget Officials Network Survey, placing federal interim reporting on par with other OECD jurisdictions. Detail At the same time, the PBO also identified unevenness in the quality of individual reports prepared by departments and agencies; noting that less than one-quarter identified the fiscal impact of the Government’s Operating Budget Freeze and only two departments identified the impact of the recent Strategic Review reductions announced in Budget 2011. Subsequent to this, the President and Secretary of the Treasury Board committed to the House of Commons Standing Committee on Government Operations and Estimates that further effort would be made to improve the quality of organizations’ reports, including the weaknesses identified by the PBO.2 Do the data fully explain the change in authorities from the previous year? Does the report list the same statutory and voted authorities presented in the Estimates documents? Variances Is there an explanation of all material variances identified by the PBO? Operating Budget Freeze Does the report identify the financial impact and management strategy regarding the Operating Budget Freeze? Strategic Review Does the report explain the financial and operational impacts of the Strategic Review restraint measures previously announced in Budget 2011? As before, each report was assessed and given one of three potential rankings: 1. The report does disclose the information; 2. The report does not disclose the information; or, 2. Second Quarter Reports Federal departments and agencies released their financial reports for the second quarter of 2011-12 at the end of November. The PBO reviewed each report to determine if there was a change in any of 1 http://www.parl.gc.ca/PBODPB/documents/Quarterly_Reports_November_2011_EN.pdf. Accessed December 2011. 3. The disclosure is not applicable (e.g. the organization was not subject to a Strategic Review in 2010). Annex A contains the updated review matrix for all quarterly reports. The overall quality of departments’ and agencies’ quarterly reporting improved, compared to the first quarter. 2 http://www.parl.gc.ca/HousePublications/Publication.aspx?Do cId=5275325&Language=E&Mode=1&Parl=41&Ses=1. Accessed December 2011. 3 The scope of the PBO’s review did not encompass compliance with applicable Treasury Board Standards and other statutory requirements. 1 Interim Financial Reporting Practices Most organizations now provide sufficient data to reconcile changes in spending authorities from one year to the next. With a few exceptions, all organizations provide updates on each authority listed in the Estimates documents. Virtually all organizations explain material changes in expenditures identified in the PBO’s Expenditure Monitor. At the same time, there was less improvement in the disclosure of federal austerity measures. Only one-third of organizations identify the impact of the Government’s Operating Budget Freeze (up from one-quarter in the first quarterly reports). Roughly half of organizations affected by the 2010 Strategic Review exercise outline the specific impacts (up from one-quarter in the first quarterly reports). 3. Conclusion The quality and consistency of organizations’ quarterly reports continues to improve. In general, these documents are a good source of data and information for parliamentarians. Parliamentarians may wish to note the continuing unevenness in disclosures pertaining to austerity measures (i.e. amount of reductions, specific operating impacts), especially given that almost two years have passed since implementation of the Operating Budget Freeze and almost one year since implementation of the 2010 Strategic Reviews.4 The PBO has begun to integrate the quarterly reports into the Expenditure Monitor, which supports Parliament’s analysis of the Government’s Estimates.5 4 Beyond the examples of good disclosure exhibited in various organizations’ quarterly reports, the Government has also previously disclosed the specific financial impacts of program reductions/austerity measures in the Estimates documents http://www.collectionscanada.gc.ca/webarchives/200712141 03217/http://www.tbs-sct.gc.ca/estpre/20062007/sups/b/pub/me-001_e.pdf Accessed December 2011 as well as the operating impacts via the web www.expenditurereview.gc.ca Accessed December 2011. 5 http://www.parl.gc.ca/PBODPB/documents/Expenditure_Monitor_2011Q1_EN.pdf Accessed October 2011. 2 Interim Financial Reporting Practices Annex A: Assessment Matrix Dark Blue = Present Red = Missing Light Blue = Not Applicable Aboriginal Affairs and Northern Development Canada Agriculture and Agri-food Canada Assisted Human Reproduction Canada Atlantic Canada Opportunities Agency Canada Border Services Agency Canadian Industrial Relations Board Canada Revenue Agency Canada School of the Public Service Canadian Artists and Producers Professional Relations Tribunal Canadian Centre for Occupational Health and Safety Canadian Environmental Assessment Agency Canadian Food Inspection Agency Canadian Forces Grievance Board Canadian Grain Commission Canadian Heritage Canadian Human Rights Commission Canadian Human Rights Tribunal Canadian Institutes of Health Research Canadian Intergovernmental Conference Secretariat Canadian International Development Agency Reconciliation Detail Variances Operating Budget Freeze Strategic Review Do the data fully explain the change in authorities from the previous year? Does the report list the same statutory and voted authorities presented in the Estimates documents? Is there an explanation of all material variances identified by the PBO in the Expenditure Monitor? Does the report identify the financial impact and management strategy regarding the Operating Budget Freeze? Does the report explain the financial and operational impacts of the Strategic Review restraint measures previously announced in Budget 2011? No report located on Web site 4 Interim Financial Reporting Practices Annex A: Assessment Matrix Dark Blue = Present Red = Missing Light Blue = Not Applicable Canadian International Trade Tribunal Canadian Northern Economic Development Agency Canadian Nuclear Safety Commission Canadian Polar Commission Canadian Radio-Television and Telecommunications Commission Canadian Space Agency Canadian Transportation Agency Citizenship and Immigration Canada RCMP Public Complaints Commission Copyright Board of Canada Correctional Investigator of Canada Correctional Service of Canada Courts Administration Service Department of Finance Canada Foreign Affairs and International Trade Department of Justice Canada Economic Development Agency for the Regions of Quebec Environment Canada Federal Economic Development Agency for Southern Ontario Reconciliation Detail Variances Operating Budget Freeze Strategic Review Do the data fully explain the change in authorities from the previous year? Does the report list the same statutory and voted authorities presented in the Estimates documents? Is there an explanation of all material variances identified by the PBO in the Expenditure Monitor? Does the report identify the financial impact and management strategy regarding the Operating Budget Freeze? Does the report explain the financial and operational impacts of the Strategic Review cuts previously announced in Budget 2011? No report located on Web site 5 Interim Financial Reporting Practices Annex A: Assessment Matrix Dark Blue = Present Red = Missing Light Blue = Not Applicable Reconciliation Detail Variances Operating Budget Freeze Strategic Review Do the data fully explain the change in authorities from the previous year? Does the report list the same statutory and voted authorities presented in the Estimates documents? Is there an explanation of all material variances identified by the PBO in the Expenditure Monitor? Does the report identify the financial impact and management strategy regarding the Operating Budget Freeze? Does the report explain the financial and operational impacts of the Strategic Review cuts previously announced in Budget 2011? Financial Consumer Agency Financial Transactions and Reports Analysis Centre of Canada Fisheries and Oceans Canada Hazardous Materials Information Review Commission Health Canada Human Resources and Skills Development Canada Immigration and Refugee Board of Canada Industry Canada Infrastructure Canada Library and Archives Canada Military Police Complaints Commission National Battlefields Commission National Defence and the Canadian Forces National Energy Board National Film Board National Research Council of Canada National Round Table on the Environment and the Economy Natural Resources Canada 6 Interim Financial Reporting Practices Annex A: Assessment Matrix Dark Blue = Present Red = Missing Light Blue = Not Applicable Reconciliation Detail Variances Operating Budget Freeze Strategic Review Do the data fully explain the change in authorities from the previous year? Does the report list the same statutory and voted authorities presented in the Estimates documents? Is there an explanation of all material variances identified by the PBO in the Expenditure Monitor? Does the report identify the financial impact and management strategy regarding the Operating Budget Freeze? Does the report explain the financial and operational impacts of the Strategic Review cuts previously announced in Budget 2011? Natural Sciences and Engineering Research Council Northern Pipeline Agency Office of the Auditor General Canada Office of the Chief Electoral Officer Office of the Commissioner for Federal Judicial Affairs Office of the Commissioner of Lobbying Office of the Commissioner of Official Languages Office of the Communications Security Establishment Commissioner Public Prosecution Service of Canada Office of the Information Commissioner of Canada Office of the Privacy Commissioner of Canada Office of the Public Sector Integrity Commissioner of Canada Office of the Secretary of the Governor General Parks Canada Parole Board of Canada Patented Medicine Prices Review Board Privy Council Office Public Appointments Commission Secretariat 7 Interim Financial Reporting Practices Annex A: Assessment Matrix Dark Blue = Present Red = Missing Light Blue = Not Applicable Public Health Agency of Canada Public Safety Public Servants Disclosure Protection Tribunal Public Service Commission Public Service Labour Relations Board Public Service Staffing Tribunal Public Works and Government Services Canada RCMP External Review Committee Registry of the Competition Tribunal Registry of the Specific Claims Tribunal Royal Canadian Mounted Police Security Intelligence Review Committee Social Sciences and Humanities Research Council Statistics Canada Status of Women Canada Supreme Court of Canada Transport Canada Transportation Appeal Tribunal of Canada Transportation Safety Board Treasury Board Secretariat Truth and Reconciliation Commission Veterans Affairs Canada Reconciliation Detail Variances Operating Budget Freeze Strategic Review Do the data fully explain the change in authorities from the previous year? Does the report list the same statutory and voted authorities presented in the Estimates documents? Is there an explanation of all material variances identified by the PBO in the Expenditure Monitor? Does the report identify the financial impact and management strategy regarding the Operating Budget Freeze? Does the report explain the financial and operational impacts of the Strategic Review cuts previously announced in Budget 2011? No report located on Web site and no response to email inquiry from PBO No report located on Web site and no response to email inquiry from PBO 8 Interim Financial Reporting Practices Annex A: Assessment Matrix Dark Blue = Present Red = Missing Light Blue = Not Applicable Reconciliation Detail Variances Operating Budget Freeze Strategic Review Do the data fully explain the change in authorities from the previous year? Does the report list the same statutory and voted authorities presented in the Estimates documents? Is there an explanation of all material variances identified by the PBO in the Expenditure Monitor? Does the report identify the financial impact and management strategy regarding the Operating Budget Freeze? Does the report explain the financial and operational impacts of the Strategic Review cuts previously announced in Budget 2011? Veterans Review and Appeal Board Western Economic Diversification Canada 9